Exit readiness: the one gap that caps your price

Most owners think about price. Buyers think about risk. The gap between the two is usually one thing. You can work on it years before you sell.

Few owners are ready.

In the US, only 8% of owners say they are fully prepared for succession.[6] In Canada, only 6% have a formal written plan.[5]

Canadian owners name their top barriers: finding a buyer, finding time, and knowing what the business is worth.[5] Almost a third also name how much the business depends on them.[5]

The gap is usually you.

Ask yourself one question. Could the business run for two weeks without you, with no calls and no email? If the answer is no, that is the gap.

When the owner is the business, a buyer sees risk. Customers may leave when you do. Key know-how may walk out the door.

So buyers pay less, pay you over time, or ask you to stay for years.

What the gap costs.

Suppose a business has $300,000 in seller's earnings.

If it depends on the owner, it might sell at 2.5 times. That is $750,000. If it runs without the owner, it might sell at 3.0 times. That is $900,000.

The gap is worth $150,000. This is an estimate, not a formal valuation.

Other gaps buyers look for.

1. One big customer. If one customer is a large share of sales, losing them would hurt. Buyers price that in.
2. Messy books. If a buyer can't check your numbers quickly, they trust them less.
3. No second in command. A buyer wants someone who can run the place on day one.
4. Nothing written down. How you quote, hire, order, and serve customers should be on paper.
5. Leases and contracts. Short leases or contracts that end with a sale can lower the price.

How to close the owner gap.

1. Name your number two. Pick the person who could run things. Start giving them real decisions.
2. Hand off customers. Introduce your key customers to your team. Let them build the bond.
3. Write it down. Put your daily know-how into simple steps someone else can follow.
4. Take a real vacation. Two weeks away is the best test. Note what breaks, then fix it.
5. Track it. Measure progress every quarter, so you can see the value move.

Start early.

These changes take time. Owners who start two to five years before they leave have room to close the gap. That time also helps with taxes and family plans.

It helps even if you never sell.

A business that runs without you is easier to pass on. You can hand it to family, sell it to staff, or just enjoy it. It also protects your family if something happens to you.

Find your gap.

Our free 5-minute check names the one gap that caps your price. It also shows your estimated value range and which of six paths fits you.